January, 2024

Issue #3

Edito
A new year begins, and 2023 ended on a bittersweet note. COP28 concluded
with an imperfect commitment to transition away from fossil fuels and failed toaddress any short-term issues. Not surprisingly, how to make private financework for the climate - for a change - was only discussed on the sidelines. Yet,among the few developments during COP28 to be welcomed are a France-led
initiative - the Coal Transition Accelerator - to stop investment into new coalprojects and speed up existing coal plants retirement, as well as its call fordifferentiated rates in order to raise the cost of capital for fossil activities andencourage the financing of sustainable activities. These two public
interventions would be more than welcome as a strong incitement to theprivate financial sector to act more swiftly on climate issues.
Because the situation is concerning. Despite the growing urgency to alignfinancial flows with a 1.5°C trajectory, 2023 saw a slowdown in the adoption offossil fuel sector policies - with hardly 80 new commitments in 2023, comparedto over 180 in 2022 - and perhaps more worrying, a slowdown of robust
policies. Most have failed to address the urgent matter: stopping thedevelopment of new fossil fuel projects, with banks in particular lagging behind
insurers and investors. Only one of the handful of 2023 policies restricting
support to oil and gas expanders came from a bank. The state of affairs is notshinier on coal. While banking heavyweight Bank of America might havebackpedaled on already weak restrictions, Asian banks are still at square one: anew report by BankTrack shows that half of the major banks still have no policy
on coal, leaving the door open to funding the sector’s expansion on thecontinent.
Several reasons could be found. In addition to the anti-ESG movement brewing
in the US and the geopolitical context, the debate has shifted to the realm of
decarbonization targets, which have emerged as the preferred indicators ofclimate action for financial institutions. While targets are useful tools, they are
just one of the necessary components of transition plans, which must also
include alignment targets as well as engagement policies, and sectoral policies
that end support for companies that are expanding fossil fuel production anduse. Let us work towards these goals in 2024.

Noam-Pierre Werlé, Policy Analyst at Reclaim FinanceNew policies & updates

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8coalpolicies

oil & gas
policies

sustainable
power targets+5 updates:+4 updates:

ING
MEAG
ERAFP
MACSF
Bank ofAmerica

MEAG
ERAFP
MACSF
Bank ofAmerica

Focus on liquefied natural gas (LNG)
In 2022, the International Energy Agency (IEA) first stated that there was noroom for new oil and gas midstream infrastructure if the world should reachnet zero in 2050. This statement points at liquefied natural gas (LNG), theexpansion of which is incompatible with the 1.5°C objective, and a threat to theclimate, the environment and local communities. Still, it is going strong andbacked by financial institutions.

What is LNG?
Liquefied natural gas is a product resulting from the highly energy-intensive
process of cooling fossil gas to about -160°C. liquefaction of fossil gas in order
to transport it. Belonging to the midstream part of the gas value chain, theliquefaction process makes a given volume of gas fit into a space 600 times
smaller; it is used to drastically increase the amount of gas a carrier can store
and transport overseas. Once at shore, it is processed through a regasification
unit where it is brought back to standard pressure and temperature conditions,and evaporates again. It is then injected into the gas distribution network. LNG
can sometimes be kept at liquid state to be used as a fuel.

Why is it expanding so fast?
Since the post-pandemic energy crisis and even more since the war in Ukraine,
LNG has been booming. Worldwide, new import and export terminals are being
proposed at an unprecedented pace, despite experts, including the IEA,
showing that it would not be a short-term solution but a long-term issue. Thesedevelopments could lead us to overshoot the IEA’s net zero pathway by almost
2 GtCO₂, about five times the CO₂ volume that France emitted in 2022. All this
supply will also exceed demand. Financial institutions are backing thisexpansion, either financing LNG projects directly or companies carrying out
new projects.

What should financial institutions do?
As LNG gets bigger, the financial sector seeks bigger profits. Among top banks,
only nine have policies in some way tackling LNG, leaving room to the vast
majority to finance new facilities. These nine policies mostly consist of projectlevel restrictions ending support to a minority of terminals, for example those
directly associated with new fields, which is far from what would be needed to
fully align with the science. Financial institutions should urgently cease theirsupport of all new LNG projects and companies developing them.

Find out more

Latest news
ING shows the way for steel
decarbonization.
The Dutch bank has become the first majorbanktoannounce

stopping

dedicatedfinance for new and expanding unabatedsteel blast furnaces, as well as new andexpanding coking (metallurgical) coal mines.
Read moreFinancial institutions targets
are neither ambitious nor
transparent enough.
The first conclusions drawn from theGlasgow Financial Alliances for Net Zero(GFANZ) are practices, as the design ofmany decarbonization targets is deeply
flawed. Read more

Need some (more) clarification
on what counts as sustainableenergy?
Read our technology factsheets on
bioenergy, energy storage, hydrogenand CCUS in power. Read more

Resources

DiscoverDiscoverDiscoverTake action!
Find out more about our recommendations for banks to adopt a robust oil &gas policies.

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